American Management Association Seminars

Valuation Of Companies: The Practical Aspects
Seminar No: 01534 -XNBB
CEU Credits: 1.8
Length: 3 days

Appearances and accepted "formulas"--plus the sputtering economy--can distort your perception of a company’s value.

No matter what your reason for wanting to know a company’s true value, this practical seminar will give you the hard facts critical to success. You’ll cover all facets of valuation--from the very beginnings to writing the final check. Learn which valuation methods make sense for the buyer or the seller...whether to use capitalization rates or multiples, cash flows or book to value a company of any size...and how the process differs for entities with special tax treatment versus C-type corporations. Theory will be reduced to a minimum; the emphasis will be on practical applications.

Top-level management, including CEOs and chief financial officers, company owners, presidents, vice presidents of finance, controllers, treasurers, corporate planning directors, directors of business development and of mergers and acquisitions, financial analysts and planners, accountants and corporate executives involved in buying and/or selling companies. This seminar will also benefit bankers, security analysts, investment advisors, portfolio managers, trust executives and attorneys.

How You Will Benefit:

  • Know what to look for in determining a business's value
  • Successfully obtain information to prepare a valuation
  • Know how discount rates, capitalization rates and value multipliers inflate or deflate value
  • Distinguish between liquidation value and going concern value
  • Accurately analyze financial statements and ratios
  • Precisely calculate cash flow and economic value added
  • Successfully predict a company's future
  • Goodwill: Know how to put a dollar sign on an abstraction

What You Will Cover:

  • The first step: Gathering essential data for a sound decision
  • Income-based valuation approaches: Accrual accounting earnings--an unreliable measure of value
  • Discounted cash flow approach: Why cash flow is critical (the true measure of corporate value)
  • Discount and capitalization rates
  • Asset-based valuation approach: When and why assets may take precedence over income or cash flow
  • Market-comparable or "yardstick" approaches: How inappropriate multiples "pump" or "cut" value
  • Premiums
  • Valuation: The practical aspects

Extras From AMA!
Detailed case studies highlight the practical judgments involved in step-by-step application of valuation approaches.

Extended/Detailed Seminar Outline

Learning Objectives

  • Know What to Look for in Determining a Business’s Value
  • Successfully Obtain Information to Prepare a Valuation
  • Know How Discount Rates, Capitalization Rates, and Value Multipliers Inflate or Deflate Value
  • Distinguish between Liquidation Value and Going Concern Value
  • Accurately Analyze Financial Statements and Ratios
  • Precisely Calculate Cash Flow and Economic Value Added
  • Successfully Predict a Company’s Future
  • Goodwill: Know How to Put a Dollar Sign on an Abstraction
Standards and Premises of Value
  • Use and Understand Terms Common to Valuation
  • Define the Different Standards of Value
  • Understand When Each of These Standards Is Applicable
  • Define the Premises under Which These Standards of Value Can Be Developed
  • Grasp When Each Premise Should Be Used, and Why
  • Understand the Difference between Value and Price
Value and Risk Drivers
  • Identify the Relevant Value Drivers on a Case-by-Case Basis
  • Identify the Relevant Risk Drivers on a Case-by-Case Basis
Valuation Method
  • A Basic Familiarity with Each of the Valuation Approaches
  • Understand Which Valuation Methods Are Subsets to Each of the Valuation Approaches
  • An Overview of What Approaches/Methods Are, Generally Speaking, More Appropriate for Mergers and Acquisitions
Adjusting the Target’s Financial Statements
  • Understand Why the Target’s Financial Statements Nearly Always Need to Be Adjusted
  • Identify the Adjustments Common to Valuation
  • Understand Why and How the Control or Noncontrol Characteristics of the Interest Being Valued Should Affect the Applicability of a Given Adjustment
  • Review Some of the Adjustments Commonly Made to Balance Sheets
  • Review Some of the Adjustments Commonly Made to Income Statements
Synergy and the M&A Valuation Process
  • Define Synergy
  • Introduce Bounce-Back Synergy
  • Understand Which Party Brings Synergy to the Transaction
  • Understand the M&A Valuation Process
  • Understand Why Each Step Is Critical to a Successful M&A Transaction
  • Identify and Avoid the Common Errors in the M&A Process
Income Approach
  • Understand the Primary Methods under the Income Approach
  • Learn the Procedures Common to the Income Approach’s Methods
  • Discuss and Contrast the Various Return Streams That Can Be Used in the Income Approach
  • Develop an Understanding of When to Use Each of the Income Methods, and Why
  • Define Net Cash Flow and the Components Essential to Its Calculation
  • Define and Contrast the Equity Model and the Invested Capital Model
  • Avoid Wrong Cash Flow Forecasts
Estimating the Future Growth Rate
  • Grasp Why a Reasonable Estimate of Interim and Long-Term Growth Is Essential to a Reasonable Estimate of Value
  • Identify the Primary Factors That Influence the Estimate of Growth
  • Discern between Various Kinds of Growth Rates, e.g.,: Revenue, Income, Cash Flow, etc.
  • Identify and Avoid the Errors Common to Estimating Growth
Cost of Capital
  • Convert a Risk Profile into a Rate of Return
  • Understand Why the Acquirer’s Internal Cost of Capital Is Rarely an Appropriate Rate of Return for the Valuation of a Target
  • Learn the Components of the Market’s Rate of Return
  • Understand Why the Rate of Return Must Be Different for Different Types of Income or Cash Flow, and How to Make the Adjustments
  • Develop a Rate of Return to Value-Equity, Including an Example
  • Develop a Rate of Return to Value-Invested Capital, Including an Example
  • Learn How to Convert a Book-Value Basis Weighted Average Cost of Capital to a Market-Value Basis Weighted Average Cost of Capital
Discounts and Premiums
  • Identify the Primary Discounts and Premiums That May Apply in a Given Valuation
  • Learn When and Why These Discounts and Premiums Are Applicable
  • Select and Support the Size of Each Appropriate Discount and Premium
  • Learn Why a Certain Discount or Premium May Be Applicable to Some but Not All Valuation Methods Employed in One Valuation
Distributor Councils
  • Identify the Roles on a Successful M&A Team
  • Review the Factors That Should Influence Whether or Not Some of the Team Members Should Be Outsourced
  • Understand Why a Business Valuation Expert Is Essential to Success in M&A as Is a Legal and Tax Expert
Asset Approach
  • Define the Asset Approach and the Methods and Premises Applicable to It
  • Determine When This Approach Should Be Used and Why
  • Understand the Influence of the Subject Interest’s Control or Lack of Control Characteristics on the Appropriateness of the Asset Approach
  • Determine How the Subject Company’s Industry and the Standard of Value Can Influence the Use of This Approach
  • Understand the Special Issues That Must Be Decided to Employ This Method
Market Approach
  • Define the Market Approach and the Methods and Premises Applicable to It
  • Understand the Type of Data Necessary to Employ This Approach
  • Know When This Approach Should Be Used and Why
  • Understand the Influence of the Subject Interest’s Control or Lack of Control Characteristics on the Appropriateness of the Market Approach
  • Understand How the Subject Company’s Industry and the Standard of Value Can Influence the Use of This Approach
  • Select the Appropriate Market Multiples for a Given Valuation
  • Review a Condensed Example of a Market Method
The Art of the Deal
  • Understand the Journey from Value to Price
  • Bridge the Gap between the Seller’s Price and the Buyer’s Price
  • Appreciate the Magic and Misery of Earn-outs
  • Allocate the Purchase Price
  • Use Collars to Limit the Change between Contract and Closing
Private-Company Shareholder Issues
  • Understand the Reasons Private Companies Need Valuations
  • Understand the Role of Valuation in a Shareholder Agreement
  • Recognize Some of the Valuation Problems That Reside in Most Shareholder Agreements
  • Understand Valuations for Estate Planning and Settlement
  • Understand the Valuation Issues Relevant When Shareholder Value Disputes Arise
  • Understand Employee Stock Ownership Plans (ESOPs)

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